>> this is n.b.r. >> susie: good evening, everyone. i'm susie gharib. tom's off tonight. worries about corporate earnings heat up as two chip makers warn sales are cooling down. from cheerios to spam, how rising food prices could take a bite out of profits at some of the nation's biggest food companies. we talk with the c.e.o.s of general mills and hormel. and with more than $200 million in missing client money, another financial firm lands in hot water with regulators. we'll tell you who it is this time. that and more tonight on nbr! pessimism about corporate profits triggered a fourth day of selling here on wall street. the dow fell 83 points after posting a triple-digit gain earlier in the day. the nasdaq lost 29 points and

the s&p slipped 11. a sales warning from engine maker cummins added to nervousness about earnings season. and, as suzanne pratt reports, investors have reason to fret. >> reporter: wall street could certainly use another topic to focus on, what with europe dominating headlines for weeks. earnings season is likely to provide that distraction. but it's also likely to make many investors unhappy. that's because s&p 500 firms are expected to report only a 5.5% gain in second quarter profits. a few months ago, the number was a healthier 9%. >> it's very worrisome, because companies have already given a lot of negative pre-announcements. in fact, for every one positive pre-announcement, we've received three negative pre-announcements, which is the weakest showing since the fourth quarter of 2008. >> reporter: making matters worse, a big slice of the s&p 500's q-2 gain will come from one company, apple. the other 499 names in the s&p are dealing with a host of problems, including a slowing u.s. economy.

on top of that, there's europe's big debt crisis and the emerging slowdown in china. >> double-digit growth in china has now shrunk to about 8%, and while that's still a great number, companies just can't rely on those outstanding sales numbers they were getting from china. >> reporter: the scariest thing about an earnings slowdown is that corporate profits have been a bright spot in the recovery. perhaps it's unrealistic to think corporate america would be unscathed. suzanne pratt, nbr, new york. >> reporter: this is darren gersh in washington. the beleaguered blackberry maker, research in motion, faces shareholders. analysts see a company fighting for its life, but the c.e.o. says there's nothing wrong. "nightly business report" is brought to you by:

captioning sponsored by wpbt >> susie: back now to our top story-- outlook for corporate earnings. one topic that you'll be hearing a lot-- how the strong dollar and weak euro is impacting quarterly earnings. with us to talk about that, wolfgang koester, the c.e.o. of fire-apps, a consulting firm that advises companies on currency strategies. so wolfgang, how much of an impact will the euro and the dollar have on corporate earnings this season? what can you tell us? >> it's going to be significant. it's not just the euro and the dollar which move quite well, it's also other currencys as well. europe having after overall impact from the dollar versus the euro strength, and then the dollar versus other

currencies. that doesn't help >> susie: can you give us some names? >> yeah, absolutely. so you started earnings season with alcoa. $26 million hit just on the balance sheet alone. very avoidable. you just had coming out. and part of the top line impact is due to foreign exchange, and they said so. ibm historically, and by third quarter of 2011, they had a 700 million top line negative impact. you have companies like coca-cola continue to have negative impact when you have strength in the dollar versus currencies. >> and see they are going to impact. >> susie: and is this just for now? is this volatility going to continue for the remaining quarters of this year? >> absolutely, yes. it's going to stay here not only about the nervousness of

europe, and still the potential of a breakup and all the uncertainty, not just around greece, but spain and italy, and then you've got after that, china broadening their band width and loosening ties to the dollar which will create volatility as well. so not just europe. china is going to be there as well. and brazil >> susie: you know, you talk a lot to ceos and directors in boardrooms, what can you tell us about their level u5 confidence in this environment, and what's going on here nationally with businesses in the u.s., what they telling you about their plans for hiring. >> first of all, they are worried about europe. there is an increased worry about what's going on with china. you reported earlier we're in the single digit growth. they're looking for double digit growth. china is going to start making them nervous. and after that the political

environment in the united states, very nervous about health care, and looking nf,ly about the other aspects with what's going on with the tax kutds, for example. every year, lots of talk about it. how does a ceo run a company when there's uncertainties, he or she has to stay conservative, and hold k back on investment and not helping job growth either. >> susie: wolfgang koester thank you for coming on the program. >> susie: all this week, we're

focusing on what investors can expect the second half of the year. one big question is what happens to food prices? if grain prices are any indication, then they could be going higher. as diane eastabrook reports that is a dilemma facing many food companies. >> reporter: what looks like the hottest, driest summer in a quarter of a century is taking a toll on the nation's grain belt. as a result, futures prices for corn, soybeans, and wheat have jumped between 10% and 30% in just the past few weeks. if grain prices keep climbing, food processors and consumers could feel the sting for months. the pain could be especially acute at the meat counter. cattle producers are beginning to liquidate herds because the grain used to feed them is getting too pricey. while that could mean cheaper beef prices this summer, it could also mean much higher prices next year as ranchers rebuild herds. analysts say pork and poultry producers may be forced to do the same thing. in the past year, food companies have been raising prices to

offset higher commodity costs, but some analysts think it may be harder to raise them again. >> you have already seen, across the board from these consumer packaged goods companies, their volumes have declined in the face of these higher prices, and if the consumer has the same number of dollars to spend and prices are higher, they can't buy as many goods. >> reporter: joining us with more on rising food costs, jeffrey ettinger, c.e.o. of hormel foods. welcome to nbr. >> thank you for having me. >> susie: you mentioned last year in a corporate responsibility letter that you were worried then about rising grain costs. obviously, you couldn't foresee this drought we're having now. how much of a hit have these grain prices been >> it really hasn't affected our results in 2012, we have a significant hedge on cormeal br the turkey operation, but it's something we're watching

carefully. as many farmers in the country, we're looking for rain to help improve the crop. but over time it would put pressure on our business if we don't see relief with the weather. >> susie: i'm looking at future prices going out several months. is it possible to keep hedging, or is thal becoming more difficult? >> we try to hedge our positions between 25 and 75%. we have on a rolling basis. but clearly at some point, once all the different markets going forward go up, those are the prices that would be available at that time. we're taking a wait and see approach to see what happens in terms of the overall crop. >> there's been other years when we had less than favorable weather and things improve. see if that occur this is year. >> susie: if we continue to see these high prices, is it possible to raise prices? >> well, certainly our first approach would be to try and find other efficiencies in our

operation. we take pride in the continuous efforts that our team comes up with all the time. we'll try to oox*uf set cost increases first. at some point your pricing has to keep up with costs. we've had reasonable success in increasing pricing. we'll have to see going forward what the pricing environment will look like. >> susie: mr. etinger, thank you for joining us. >> thank you for having me. >> susie: the c.e.o. of general mills told analysts here at the n.y.s.e. today he expects costs for key food ingredients will moderate over the next year. the minneapolis company with brands including cheerios cereal, pillsbury crescent rolls, and yoplait yogurt forecasts food inflation will be up only 2% to 3% this year. when i talked with c.e.o. ken powell, he explained why he expects food prices to stabilize. >> oil prices have come down, our package think costs, and

includes the costs in our plant. we're seeing some movement in corn now in the grain complex. but overall, as we look at the whole market basket of goods that we buy, we see the low single digit level. >> consumers have been complaining about paying higher prices for food. and as commodity prices go up, will they have to pay even more -- will consumer have to pay more for food? >> they had to pay more this year, no doubt about it. there's wide price increases across all the sectors of our industry. as we go into next year, and dpaen, we think inflation environment is going to be better, we think there will be much less in the way of consumer price increases. tlaer going to see relative stability. >> susie: you announced job cuts. how likely is it you're going to have to cut more because of costs? >> i don't think it's likely. we had to do that on a one time basis because we looked at our business model and conditions going forward. it was a painful decision, but we had that to that, and

that's behind us. we have other ongoing problems in the company to help absorb inflation. we're focused on productivity and taking costs out of our supply chain basically through leverage and continuous improvements. those things help us absorb the inflation we see. >> susie: you said general mills is going to introduce 70 new products over six months. a big marketing campaign. that sounds upbeat. what's your market outlook for six months? >> consumers respond to innovation. we have great new products and yogurt. we have a lot of new cereals and snack bars. consumers are finding value in the grocery store, and finding it a great way to stretch the family budget, eat more at home and less away from home. it's a good set of circumstances for a company like general mills. that's why we're optd mystic. >> susie: stl us about the outlook in europe. you said a lot of your sales

are out of europe: >> i think the economic situation in europe is very challenging. but our business in europe has done well. its done very well. >> seie: why is it? >> we're in categories, for the most part that are still lower penetration in a earlier stage of their development. so one of our businesses in europe is haagen-daz super premium ice cream which people are still in the process of discovering in europe. and that's high growth the last couple of years. and start for example this year. the other thing is we're not really strongly represented in some of the economies that are weakened. so we have a small business in italy. our business is concentrated in the uk and ireland, and france, and coming stronger. i think as a result, our overall performance in europe has been pretty darn good.

>> susie: it looks like a repeat of m.f. global, but this time, the fraud appears to be smaller. more than $200 million in client money is missing from p.f.g. best, the futures brokerage firm. federal regulators today sued the firm and its chairman russ wasendorf, sr., for misappropriating client funds and submitting phony bank records for at least the past two years. the national futures association froze p.f.g.'s accounts late yesterday, after the company reported wasendorf had attempted suicide. he remains in critical condition. we spoke with wasendorf back in november as the futures industry

was grappling with the m.f. global debacle. >> f.c.m.s are required to keep their customer funds segregated from their operating capitol. that's religion in the f.c.m. world. we don't ever violate that. >> susie: also today, p.f.g. best's clearing agent, jefferies group, unloaded positions held by p.f.g. customers after the firm failed to meet a margin call. jefferies says it does not expect to incur any losses. as we mentioned, worries that corporate earnings will fall short of expectations set the tone for trading on wall street today. the s&p 500 opened to the upside but quickly lost ground, leading the index to close near its worst level of the day, down 11 points at 1,341. trading volume swelled on the big board to 726 million shares, while nasdaq volume topped 1.7 billion shares.

the industrials lead today's pullback, losses there tied to selling in alcoa after last night's lackluster second- quarter results. the materials and energy sectors also under pressure. alcoa shares down 4% today, despite stronger than expected results. c.e.o. klaus kleinfeld told us last night he's projecting strong demand for aluminum, even though prices are plunging. cummins also on the worry list today. as we mentioned, the truck engine maker warned on sales, cutting its full-year outlook. cummins stock fell nearly 9% to $86.91 a share. heavy machinery maker caterpillar fell in sympathy, down 3.5%. investors also chipped away at chip stocks after a warning from advanced micro devices that we told you about last night. a.m.d. was the s&p 500's worst performer. the firm cut its sales and earnings targets on slumping demand in europe and china. investors bailed on the stock--

it tumbled 11% to just under $5 per share, its lowest level this year. we have more analysis on a.m.d. on our web site, nbr.com. you can find it under the "blogs" tab with michael kahn. compounding weakness in the chip sector-- a warning today from applied materials. the stock fell nearly 3% after a-mat cut its full year guidance on weak demand. investors also took a bite out of mako surgical. mako shares lost 43%. goldman sachs cuts the stock from "buy" to "neutral" on worries about the company's ability to sell its robotic surgical systems. and more developments on that barclays scandal-- the bank's former c.e.o. bob diamond said he will forgo $31 million in bonuses. he resigned last week. barclays shares rose slightly on the news. here in the u.s., the senate banking committee saying it will quiz fed chairman ben bernanke and treasury secretary tim geithner later this month about the interest-rate-fixing scandal.

turning to the most actively traded e.t.f.s, all to the downside by an average of 1% or more. and finally, one bright spot that may boost markets tomorrow- - fitch ratings tonight affirming its triple-a rating on united states debt, but it says the outlook remains "negative" due to uncertainty over the so- called "fiscal cliff." and that's tonight's "market focus." apple's latest ipad will soon be saying "ni-hao" to china. the company said today it will roll out its third generation tablet in china on july 20, with

prices starting at $499. apple and a hong kong firm recently settled a dispute over rights to the ipad name in china. it was a big win for apple-- china is apple's second largest market after the u.s. meanwhile in canada today, research in motion faced angry shareholders at the company's annual meeting. the firm's new c.e.o. was bombarded with combative questions on everything from the delay of the company's next generation blackberry to the 53% slide in rim's stock this year. darren gersh reports. >> reporter: at times, research in motion has seemed to move in slow motion. but the blackberry maker's new c.e.o. told frustrated shareholders that is changing. >> a lot of work is going on at rim today to help it become the lean, mean hunting machine i want it to be.

>> reporter: that would be a big change. rim delayed the launch of its next generation blackberry to january. and some big competitors are stalking rim's 78 million subscribers. >> this fall, apple, google, and microsoft are all going to have new smart phone platforms in the market. if microsoft moves in very aggressively with windows 8 and windows phone 8, then that may take a lot of place in the market that blackberry would have had. >> reporter: investors are already wondering if rim wouldn't be worth more if it were sold off in pieces. it's patents alone could be worth more than $1 billion. after all, rim's patents go back to the 1990s. the company invented many of the messaging technologies now used in smart phones worldwide. and newcomers like google have paid handsomely for patents to protect their growing market share. >> rim could sell those patents, rim could give those patents to spin them off to a holding company and re-license them.

there is definitely value that could be unlocked in rim's patents. >> reporter: for now, rim is holding its ground. the company said it gained users in the last quarter and is growing in asia. the only problem is those emerging market subscribers bring in less revenue than the customers in the united states who are still waiting for proof of a blackberry turnaround. >> at this point, we've gotten to a place where they've really got to start showing. there's been a lot of talk going on, and the c.e.o. has gone on the air and said8tyerything's fine, everything's fine," but i think people really need to start seeing an improvement. >> reporter: rim still has $2 billion in cash, but it ran up a $500 million loss in the last quarter. to cut costs, the company is laying off 5,000 workers and has reportedly sold its corporate jet. darren gersh, nbr, washington. >> susie: when an investment sounds too good to be true, that's often the case. and buying stock in a company before it goes public is no exception. finra's gerri walsh talks about the dangers of pre-i.p.o.

investing. >> before facebook's recent i.p.o., which made headlines around the world, some investors were looking for shares of the private or pre-i.p.o. stock of facebook and other social media companies. but social media has also become the latest hook on which con artists can hang a scam. pre-i.p.o. speculation involves buying unregistered shares in a private company before the initial public offering of securities, and it can range from risky deals to outright frauds. fraudsters would have investors believe that virtually anyone can get in on pre-i.p.o. deals of small, little-known start- ups, as well as those of large, popular companies. in reality, unless you are an employee or an angel investor, you are unlikely to have access to pre-i.p.o. shares. and even legitimate pre-i.p.o. investments can be fraught with risk, including the fact that you can't be certain the company being touted will actually go public. so, while the idea of getting in the ground floor of a pre-i.p.o.

company might seem enticing, investors should realize that pre-i.p.o. investing involves serious risk. i am gerri walsh. >> susie: tomorrow on nbr, investors get more clues on the thinking inside the federal reserve. the central bank releases the minutes from its last policy meeting. and everyone will be reading between the lines to figure out what the fed might do next to boost the economy. well, this doesn't happen every year, but the end of the month will mark the start of a field day for television ads and tv executives. sports analyst rick horrow explains in this week's "beyond the scoreboard". >> call it "calendar irony." every four years, our country's most patriotic time, the olympics, immediately precedes our most divisive time, election day. with a total of more than 200 million americans expected to watch some of the london olympics, it should come as no surprise that ads supporting both presidential candidates

will air during the games. the obama campaign was the first to buy ad time, spending $5.5 million for olympics commercials. in response, a political action committee supporting romney committed $7.2 million for spots in certain battleground markets. romney's campaign is expected to buy ad time soon, too. while the content of obama's ads are unknown, some of romneys ads will tout his role as the president and c.e.o. of the salt lake organizing committee for the 2002 winter olympics. also getting in the political sales game is espn. the disney sports network signed a deal with n.c.c. media, an ad- sales venture owned by several cable operators, to help sell more ad time to the campaigns. the deal is particularly noteworthy because cable is expected to take about 14% of tv political ad spending this year, up from 10% in 2008. strong live sports tv ratings likely are responsible for both the nbc and espn deals.

i'm rick horrow. >> susie: that's "nightly business report" for tuesday, july 10. have a great evening, everyone. we'll see you online at nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org

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